nep-geo New Economics Papers
on Economic Geography
Issue of 2015‒10‒17
ten papers chosen by
Andreas Koch
Institut für Angewandte Wirtschaftsforschung

  1. Location choice of German multinationals in the Czech Republic. The importance of agglomeration economies By Veronika Hecht
  2. Why do empirical tests tend to accept the NEG? An alternative approach to the 'wage equation' in European regions By Fernando Bruna
  3. Offshoring and the Geography of Jobs in Great Britain By Luisa Gagliardi; Simona Iammarino; Andrés Rodríguez-Pose
  4. Industrial Agglomeration and Use of the Internet By Chang, C-L.; McAleer, M.J.; Wu, Y-C.
  5. Do New Sports Facilities Attract New Businesses? By Kaitlyn Harger; Brad R. Humphreys; Amanda Ross
  6. Knowledge Clusters and Multidimensional Proximity: An Agent-Based Simulation. By Bottai, carlo; Iori, Martina
  7. Economic Freedom and Economic Growth Across U.S. States: A Spatial Panel Data Analysis By Kaitlyn Harger; Brad R. Humphreys; Amanda Ross
  8. Economic Institutions and the Location Strategies of European Multinationals in their Geographical Neighbourhood By Andrea Ascani; Riccardo Crescenzi; Simona Iammarino
  9. Export Spillover and Export Performance in China By Hu, Cui; Tan, Yong
  10. Río Cauca: la geografía económica de su área de influencia By Gerson Javier Pérez-Valbuena; Alí Miguel Arrieta-Arrieta; José Gregorio Contreras-Anaya

  1. By: Veronika Hecht
    Abstract: This paper analyses the location choice of German investors in the Czech Republic based on a unique dataset covering all Czech companies with a German equity holder in 2010. The identification of the regional determinants of foreign direct investment (FDI) location is an important regional policy issue as FDI is supposed to improve the labour market conditions of the host region. Using a nested logit approach the impact of agglomeration economies, labour market conditions and distance on the location choice decision is investigated. The main result of the paper is that apart from a low distance to the location of the parent company the attractiveness of a Czech district for German investors is mainly driven by agglomeration economies. Besides localisation economies the agglomeration of German companies in a region plays a decisive role. The importance of labour market characteristics differs between investment sectors, sizes and periods.
    Keywords: Location choice, FDI, Multinational enterprises, Germany, Czech Republic, Agglomeration Economies
    JEL: F24 R12 R30
    Date: 2015–10
  2. By: Fernando Bruna (University of A Coruña, Economics and Business Department)
    Abstract: This paper posits a new approach to the ‘wage equation’ of the New Economic Geography (NEG) stressing the uncertain interpretation of its empirical results. It emphasizes the generality of the variable to be explained, marginal costs. Then, two artificial (noNEG) tests are proposed in order to identify the statistical features explaining why wagetype equations tend to be accepted in tests for European data. The estimation results are shown to be similar not only when Market Potential is built for variables that do not measure market size but also when the focus of attention changes from global to local spatial patterns
    Keywords: New Economic Geography, wage equation, Market Potential, spillovers, global trend, spatial autocorrelation
    JEL: C21 F12 R12
    Date: 2015–11
  3. By: Luisa Gagliardi; Simona Iammarino; Andrés Rodríguez-Pose
    Abstract: This paper investigates the impact of the offshoring of production activities on domestic jobs in Great Britain. The paper considers both the spatial heterogeneity across local labour markets and variations in the intensity of outward flows of investments abroad (OFDI) across industries in order to shed new light on the job creation/destruction implications of offshoring. The results suggest that offshoring may generate significant job losses in routine occupations in areas that have been more exposed to the relocation of production abroad, regardless of whether the relocation has been to developed or developing/emerging countries. Offshoring to developing/emerging countries has, by contrast, a positive effect on the generation of non-routine jobs. Efficiency gains accruing from the international reorganization of production increase in the long-run, with compensation mechanisms operating through growth of employment in higher value added activities at home. Overall, our results uncover important spatial and interpersonal inequalities in job creation, which provide new challenges for public policy.
    Keywords: Offshoring, local labour markets, job creation and destruction, routine and non-routine occupations
    JEL: F21 J42 J23 J24
    Date: 2015–10
  4. By: Chang, C-L.; McAleer, M.J.; Wu, Y-C.
    Abstract: Taiwan has been hailed as a world leader in the development of global innovation and industrial clusters for the past decade. This paper investigates the effects of industrial agglomeration on the use of the internet and internet intensity for Taiwan manufacturing firms, and analyses whether the relationships between industrial agglomeration and total expenditure on internet usage for industries are substitutes or complements. The sample observations are based on 153,081 manufacturing plants, and covers 26 2-digit industry categories and 358 geographical townships in Taiwan. The Heckman selection model is used to adjust for sample selectivity for unobservable data for firms that use the internet. The empirical results from two-stage estimation show that: (1) for the industry overall, a higher degree of industrial agglomeration will not affect the probability that firms will use the internet, but will affect the total expenditure on internet usage; and (2) for 2-digit industries, industrial agglomeration generally decreases the total expenditure on internet usage, which suggests that industrial agglomeration and total expenditure on internet usage are substitutes.
    Keywords: industrial agglomeration and clusters, global innovation, internet penetration, manufacturing firms, sample selection, incidental truncation
    JEL: D2 L60
    Date: 2015–08–01
  5. By: Kaitlyn Harger (Florida Gulf Coast University); Brad R. Humphreys (West Virginia University, Department of Economics); Amanda Ross (West Virginia University, Department of Economics)
    Abstract: We examine the impact of new sports facilities on new businesses, an unexplored topic in the literature. We use data from the Dunn and Bradstreet MarketPlace files to examine how new sports facilities affect nearby business activity in terms of the number of new businesses and workers. We find no evidence of increased new businesses openings after the opening of new sports facilities in 13 US cities in the 2000s; employment at new businesses near new facilities is larger than at new businesses elsewhere in the MSA; this increase cannot be linked to businesses in any specific industry.
    Keywords: new sports facility, difference-in-differences model, firm level data
    JEL: R13 R58 H71
    Date: 2015–07
  6. By: Bottai, carlo; Iori, Martina (University of Turin)
    Abstract: We will use an Agent-Based Model in order to study how innovation can emerge from the interaction between firms. In particular, we are interested in studying how the clusters that emerges from these interactions influence the ability of bounded rational firms in reacting creatively to out-of-equilibrium conditions. Moreover, we will introduce two type of firms – traditional and innovative – and we will observe if and how this difference influences the outcomes.
    Date: 2015–07
  7. By: Kaitlyn Harger (Florida Gulf Coast University); Brad R. Humphreys (West Virginia University, Department of Economics); Amanda Ross (West Virginia University, Department of Economics)
    Abstract: There is a substantial literature estimating the effect of economic freedom on economic growth. Most studies examine the relationship between freedom and growth for countries, while a few examine the relationship for U.S. states. Absent in the state{level literature is consideration of the presence of spatial spillovers affecting the freedom{growth relationship. Neglecting to account for spatial autocorrelation can bias estimation results and therefore inferences drawn. We find evidence of a spatial pattern in real per-capita GSP that affects non-spatial estimates of the freedom{growth relationship. Taking into account the direct and indirect effects of economic freedom on GSP, we find a 10 percent increase in economic freedom is associated with a 4.2 percent increase in GSP.
    Keywords: spatial panel data model, spatial econometrics, economic freedom
    Date: 2015–07
  8. By: Andrea Ascani; Riccardo Crescenzi; Simona Iammarino
    Abstract: This paper investigates how the location behaviour of Multinational Enterprises (MNEs) is shaped by the economic institutions of the host countries. The analysis covers a wide set of geographically proximate economies with different degrees of integration with the ‘Old’ 15 European Union (EU) members: New Member States, Accession and Candidate Countries, as well as European Neighbourhood Policy (ENP) countries and the Russian Federation. The paper aims to shed new light on the heterogeneity of MNE preferences for the host countries’ regulatory settings (including labour market and business regulation), legal aspects (i.e. protection of property rights and contract enforcement) and the weight of the government in the economy. By employing data on 6,888 greenfield investment projects, the randomcoefficient Mixed Logit analysis here applied shows that, while the quality of the national institutional framework is generally beneficial for the attraction of foreign investment, MNEs preferences over economic institutions are highly heterogeneous across sectors and business functions.
    Keywords: Multinational Enterprises, Economic Institutions, Location Choice, European Union
    JEL: F23 P33 L20 R30
    Date: 2015–07
  9. By: Hu, Cui; Tan, Yong
    Abstract: This paper examines the local export spillover effect on firm-level decisionsto start exporting (the extensive margin) and export volume (the intensive margin) by exploiting a unique dataset of Chinese export firms. Based on a gravity-type equation estimated at firm level, we find thatboth nearby products anddestination specific exporterspositivelyinfluence the individual decisions of firmsto start exporting and their exportvolumes. Several methods are used to verify the robustness of these results. The results imply that the local export spillover lowers both the fixed and variable cost of exporting. In addition, we find that the effect of export spillover on exporting that is both product and destination specificis stronger than it is on exporting that iseither product or destination specificalone, but not both. Small and multi-product firmsare more likely to be influenced by the spillover effect in their decisionsto start exporting, and less likely to be influenced in theirexport volumes. Geographically, local export spillover effect is strongest on firms located in the same city;its effect on firms located in the same province but in different citiesranks second in terms of strength. This result indicates that the effect oflocal export spillover exhibits spatial decay in China.
    Keywords: Export spillover; Extensive margin; Intensive margin
    JEL: F10 R12
    Date: 2015–10–08
  10. By: Gerson Javier Pérez-Valbuena; Alí Miguel Arrieta-Arrieta; José Gregorio Contreras-Anaya
    Abstract: A través del análisis de indicadores sociales, económicos, medioambientales y de cambio climático, este documento ofrece un diagnóstico de la situación actual de la población localizada en el área de influencia del río Cauca. Para ello se tienen en cuenta los municipios contiguos al río (vecinos de primer orden) y los contiguos a estos (vecinos de segundo orden). Los resultados indican que, contrario a lo que ocurre en economías más desarrolladas, la cercanía al río no es sinónimo de mejores condiciones socioeconómicas ni de una mayor calidad de vida. Por el contrario, esta población enfrenta un rezago relativo cuando se compara con el resto del país, lo cual es particularmente evidente en la parte correspondiente a la región Caribe. Los indicadores medioambientales y de cambio climático muestran también una significativa vulnerabilidad y con alto impacto potencial sobre las poblaciones vecinas al río. ******ABSTRACT: By analyzing social, economic, environmental, and climate change related indicators this paper offers an updated diagnostic on the population located in the catchment area of the Cauca River. To do so, we consider those municipalities adjacent to the river (first order neighbors) as well as their corresponding neighbor municipalities (second order neighbors). Results show that, contrary to the experience of more developed economies, the proximity to the river does not necessarily mean better socioeconomic conditions, or a higher quality of life. Conversely, this population deals with a relative lag when compared with the rest of the country, situation that is even more evident in the corresponding part of the Caribbean region. The environmental and climate change indicators also show a significant vulnerability with considerable potential impact on the population in the catchment area of the river.
    Keywords: Río Cauca, desarrollo económico, geografía económica, Colombia
    JEL: I30 O18 R10
    Date: 2015–10–05

This nep-geo issue is ©2015 by Andreas Koch. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.